Gold prices concluded the trading session with a decline of 0.92%, settling at Rs 1,52,341. This movement was influenced by stronger-than-anticipated US producer inflation, which has heightened expectations for a more stringent policy stance from the Federal Reserve in the upcoming week. In August, the US Producer Price Index experienced a 0.4% increase, with annual producer inflation climbing to 5.4%, surpassing the anticipated 5.3%. This uptick was bolstered by rising energy prices and a wider trend of cost pass-through. Rising oil prices, in the context of escalating US-Iran strikes in the Middle East, have intensified inflation concerns.
Consequently, markets are pricing in a greater than 70% probability of a Federal Reserve rate hike on September 16. Expectations for additional tightening by the ECB have risen following the central bank’s rate increase and its cautionary note regarding the persistent upward risks associated with inflation. In a notable development for gold’s sustained demand, the People’s Bank of China has prolonged its gold acquisition streak to 22 months, raising its holdings to 76.73 million fine troy ounces from 76.08 million in July. Concurrently, the value of these reserves has ascended to $350.08 billion, up from $306.35 billion.
Indian demand has shown signs of improvement as reduced prices have stimulated buying activity, leading to a contraction in dealer discounts to approximately $54 per ounce, down from $135 the previous week. This uptick in demand occurs in the context of Prime Minister Narendra Modi’s appeal to consumers to refrain from unnecessary gold acquisitions. Chinese bullion traded at premiums ranging from $3.5 to $9 per ounce, a shift from previous discounts, whereas Asian premiums continued to exhibit modest levels. At the end of July, London vault holdings experienced a month-on-month increase of 0.74%, reaching a total of 9,534 tonnes.
This amount is valued at $1.2 trillion and is roughly equivalent to 762,723 bars. Technically, the market continues to experience long liquidation, evidenced by a 2.3% decline in open interest alongside a price drop of Rs 1,422. Gold is currently finding support at Rs 1,51,010. A breach of this level may lead to additional weakness, potentially targeting Rs 1,49,680. On the upside, resistance is positioned at Rs 1,54,060, beyond which prices may extend toward Rs 1,55,780.
